Education is central to the Human Resources Development and
empowerment in any country. National and State level policies are
framed to ensure that this basic need of the population is met
through appropriate public and private sector initiatives.

While government endeavour to provide primary education to all on
a universal basis, higher education is progressively moving into
the domain of private sector. With a gradual reduction in
government subsidies higher education is getting more and more
costly and hence the need for institutional funding in this area.

The scope of education has widened both in India and abroad
covering new courses in diversified areas. Development of human
capital is a national priority and it should be the endeavour of
all that no deserving student is denied opportunity to pursue
higher education for want of financial support.

Loans for education should be seen as an investment for economic
development and prosperity. Knowledge and information would be the
driving force for economic growth in the coming years.

The Hon�ble Finance Minister in a meeting with the Chief
Executives of the Public Sector Banks had highlighted the role of
commercial banks in facilitating pursuit of higher education by
poor, but meritorious students. He also expressed the need to have
a comprehensive educational loan scheme prepared that could be
adopted by all banks.

Accordingly, a study group under the Chairmanship of Shri
R.J.Kamath, Chairman and Managing Director, Canara Bank was
constituted to examine the issue in detail. This model scheme has
been prepared based on the recommendations contained in the report
submitted by the group in August 2000.

2. Objectives of the Scheme:

The Educational Loan Scheme outlined below aims at providing
financial support from the banking system to deserving /
meritorious students for pursuing higher education in India and
abroad. The main emphasis is that every meritorious student though
poor is provided with an opportunity to pursue education with the
financial support from the banking system with affordable terms
and conditions. No deserving student is denied an opportunity to
pursue higher education for want of financial support.

In short, the scheme aims at providing financial assistance on
reasonable terms:

to
the poor and needy to undertake basic education.

to
the meritorious students to pursue higher / professional /
technical education

3. Applicability of the Scheme:

The scheme detailed below could be adopted by all Commercial
Banks. The scheme provides broad guidelines to the banks for
operationalising the educational loan scheme and the implementing
bank will have the discretion to make changes suiting to the
convenience of the students/parents to make it more customer
friendly.

Courses offered by National Institutes and other reputed private
institutions. Banks may have the system of appraising other
institution courses depending on future prospects/recognition by
user institutions.

Any other expense required to complete the course � like study
tours, project work, thesis, etc.

5. Quantum of Finance:

Need based finance subject to repaying capacity of the
parents/students with margin and the following ceilings.

Studies in India - Maximum Rs.7.50 lacs

Studies abroad - Maximum Rs.15 lacs

6. Margin:

Up to Rs.2 lacs: Nil

Above Rs.2 lacs : Studies in India 15%
: Studies Abroad 25%

Scholarship/assistantship to be included in margin

Margin may be brought-in on year-to-year basis as and when
disbursements are made on a pro-rata basis.

7. Security:

Up to Rs.2 lacs:
No security

Above Rs.2 lacs:
Collateral security equal to 100 % of the loan
Amount of guarantee of third person known to bank for 100% of the
loan amount.

Note:

The document should be executed by both the student and the
guardian.

The security can be in the form of land / building / Govt.securities
/ Public Sector Bonds / Units of UTI, NSC, KVP, LIC policy, gold,
shares / debentures, bank deposit in the name of student
parent / guardian or any other third party with suitable margin.

Wherever the land/building is already mortgaged, the unencumbered
portion Can be taken as security on 11-charge basis provided it
covers the required Loan amount.

In case the loan is given for purchase of computer the same to be
Hypothecated to the Bank.

Banks who wish to support highly meritorious/deserving students
without security may delegate such powers to a fairly higher-level
authority.

8. Rate of Interest:

Up to Rs. 2 lacs: PLR
Above Rs.2 lacs: PLR + 1%

The interest to be debited quarterly/half yearly on simple basis
during the Repayment holiday/ Moratorium period.

The loan to be sanctioned as per delegation of powers preferably
by the Branch nearest to the place of domicile.

No application for educational loan received should be rejected
without the concurrence of the next higher authority.

The loan to be disbursed in stages as per the requirement/demand
directly to the institutions/Vendors of
books/equipments/instruments to the extent possible.

10. Repayment:

Repayment holiday / Moratorium

Course period + 1 year or 6 months
after getting job, whichever is earlier.

The loan to be repaid in 5-7 years after commencement of repayment
If the student is not able to complete the course within the
scheduled time extension of time for completion of course may be
permitted for a maximum period of 2 years. If the student is not
able to complete the course for reasons beyond his control,
sanctioning authority may at his discretion consider such
extensions as may be deemed necessary to complete the course.

The accrued interest during the repayment holiday period to be
added to the principal and repayment in Equated Monthly
Installments (EMI) fixed.

1-2% interest concession may be provided for loanees if the
interest is serviced during the study period when repayment
holiday is specified for interest/ repayment under the scheme.

11. Follow
Up:

Banks to contact college/university authorities to send the
progress report at regular intervals in respect of students who
have availed loans.

12 Processing Charges:

No processing/upfront charges may be collected on educational
loans.

13. Capability Certificate

Banks can also issue the capability certificate for students going
abroad for higher studies. For this financial and other supporting
documents may be obtained from applicant, if required.

(Some of the foreign universities require the students to submit a
certificate from their bankers about the sponsors
solvency/financial capability, with a view to ensure that the
sponsors of the students going abroad for higher studies are
capable of meeting the expenses till completion of studies.)

14. Other Conditions:

No due certificate need not be insisted upon as a pre-condition
for considering educational loan. However. Banks may obtain a
declaration/an affidavit confirming that no loans are availed from
other banks.

Loan applications have to be disposed of within a period of 15
days to 1 month, but not exceeding the time norms stipulated for
disposing of loan applications under priority sector lending.

In order to bring flexibility in terms like eligibility, margin,
security norms, banks may consider relaxation in the norms on a
case to case basis delegating the powers to a fairly higher level
authority.